Item 1.01. Entry into a Material Definitive Agreement.
On July 27, 2021, Penn Virginia Escrow LLC (“Escrow Issuer”) and Penn Virginia Holdings, LLC (“Holdings”), indirect, wholly owned subsidiaries of Penn Virginia Corporation (“Penn Virginia”), and certain subsidiaries of Penn Virginia that guarantee indebtedness under its revolving credit facility (the “Guarantors,” and collectively with Escrow Issuer and Holdings, the “Penn Virginia Parties”) entered into a purchase agreement (the “Purchase Agreement”), with BofA Securities, Inc., for itself and on behalf of the several initial purchasers listed therein, relating to the sale by Escrow Issuer of $400 million aggregate principal amount of its 9.250% Senior Notes due 2026 (the “Notes”) that will be guaranteed on a senior unsecured basis by the Guarantors (the “Offering”). The Notes will initially be sold at 99.018% of par.
The gross proceeds of the Offering and other funds will initially be deposited in an escrow account pending satisfaction of certain conditions, including the expected consummation of Penn Virginia’s merger (“Lonestar Merger”) with Lonestar Resources US Inc. (“Lonestar”) on or prior to November 26, 2021. Upon satisfaction of the escrow release conditions, Holdings will assume the obligations under the Notes and Escrow Issuer will be merged with and into Holdings (with Holdings as the surviving entity). If the escrow release conditions are not satisfied on or before November 26, 2021, or at any time prior to such date the Lonestar Merger has been terminated or Penn Virginia has decided that it will not pursue the consummation of the Lonestar Merger (or determined that the consummation of the Lonestar Merger is not reasonably likely to be satisfied by such date), then the escrowed funds will be applied to the mandatory redemption of the Notes at a price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
The Notes were issued in a private placement to qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons in transactions outside the United States pursuant to Regulation S under the Securities Act.
The Purchase Agreement contains customary representations, warranties and agreements by the Penn Virginia Parties. In addition, the Penn Virginia Parties have agreed to indemnify the initial purchasers against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the initial purchasers may be required to make in respect of those liabilities.
Upon the release of the funds from escrow, Penn Virginia intends to use the net proceeds from the Offering to repay and discharge the long-term debt of Lonestar and to use the remainder, along with cash on hand, to repay Penn Virginia’s second lien term loan in full and pay related expenses.
The initial purchasers and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. Certain of the initial purchasers and their respective affiliates have, from time to time, engaged in, and may in the future engage in, various investment banking, financial advisory services and other commercial dealings in the ordinary course of business with Penn Virginia. The initial purchasers have received or will receive customary fees and commissions for these transactions. Certain of the initial
